Saturday, February 6, 2010

Re: [CALPCandidates] What is Geo-Rent?

Pam, in all that shouting, I still don't see an answer to a question I'll ask you for the third time: Suppose that 150 years ago an Ohlone Indian family here in Silicon Valley marked off and defended ten acres for their hunting and gathering, and that their descendants still eked out that sort of existence on that unimproved land today. In my town, that land would now be worth about $20 million. How much of that value would have been created by the labor of those Ohlones? Is your answer really "100%"?

If this example is too hypothetical for you, then try these:

1) In the Silicon Valley suburb where I live, land is worth about $2 million per acre. About a half-mile west of my house is a 20-acre monastery, adjacent to the mansion recently sold by Barry Bonds, and down the street from Cisco's CEO. In it, 16 cloistered elderly nuns sleep on straw mattresses, have no TV, and wake up in the middle of the night to pray. Their order bought the 20 acres in 1950, when this area was devoted to orchards and cattle grazing. Their only "work" is "prayer", and they live only on "alms". I kid you not: http://www.poor-clares.org/losaltos/losaltosl.html.

2) About a half-mile north of my house are hundreds of acres of land owned by Stanford University in the hills above campus, with sweeping views of the San Francisco Bay. Nearly all of the land is off-limits to everyone but -- wait for it -- cows. The university grazes a handful of cows there, in order to comply with Leland Stanford's requirement that a demonstration farm be maintained on a portion of the vast amount of land he used to create the university.

So we have nuns and cows, both sleeping on straw, keeping hundreds of acres of prime Silicon Valley land off the market, thus propping up property values for my neighbors (like the Intel ex-CEO two driveways down), and making sure that their gardeners and maids can't afford to live anywhere near them.

Are you telling us this is economically efficient?

The best reason for a land-value tax is that the costs of nearby public goods gets capitalized into the value of the land. That's not true of the strawman Picasso example you keep pushing. However, it's spectacularly true of your own example of flood control. If Mr. Potter owns half of the residential lots in Bedford Falls, why should he pay only one capita's share of the cost of the dikes and levees that will make all his lots so much more valuable? Why not just finance the flood control out of the increased value of the land benefiting from the public good? When public services are financed only by recovering the extra value they create in the free market for land, it encourages efficient land use (infill, mass transit, mixed use, more open space) and creates pressure to defund public services that the community does not actually value.